NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES

Property and Casualty Insurance Reserve activity for the years ended December 31, 2015, 2014 and 2013 was:



DOLLARS IN MILLIONS	2015			2014			2013
Beginning Property and Casualty Insurance Reserves:
Gross of Reinsurance at Beginning of Year	$	733.9		$	843.5		$	970.6
Less Reinsurance Recoverables at Beginning of Year	54.9			63.4			66.2
Property and Casualty Insurance Reserves, Net of Reinsurance at Beginning of Year	679.0			780.1			904.4
Property and Casualty Insurance Reserves Acquired, Net of Reinsurance and Indemnification	125.4			—			—
Incurred Losses and LAE related to:
Current Year:
Continuing Operations	1,123.3			965.4			1,056.5
Prior Years:
Continuing Operations	(11.5		)	(53.5		)	(59.8		)
Discontinued Operations	(8.6		)	(3.6		)	(4.8		)
Total Incurred Losses and LAE related to Prior Years	(20.1		)	(57.1		)	(64.6		)
Total Incurred Losses and LAE	1,103.2			908.3			991.9
Paid Losses and LAE related to:
Current Year:
Continuing Operations	723.2			639.8			682.2
Prior Years:
Continuing Operations	366.2			360.4			421.7
Discontinued Operations	7.4			9.2			12.3
Total Paid Losses and LAE related to Prior Years	373.6			369.6			434.0
Total Paid Losses and LAE	1,096.8			1,009.4			1,116.2
Property and Casualty Insurance Reserves, Net of Reinsurance and Indemnification at End of Year	810.8			679			780.1
Plus Reinsurance and Indemnification Recoverables at End of Year	52.0			54.9			63.4
Property and Casualty Insurance Reserves, Gross of Reinsurance at End of Year	$	862.8		$	733.9		$	843.5

Property and Casualty Insurance Reserves are estimated based on historical experience patterns and current economic trends. Actual loss experience and loss trends are likely to differ from these historical experience patterns and economic conditions. Loss experience and loss trends emerge over several years from the dates of loss inception. The Company monitors such emerging loss trends on a quarterly basis. Changes in such estimates are included in the Consolidated Statements of Income in the period of change.

In 2015, the Company reduced its property and casualty insurance reserves by $20.1 million to recognize favorable development of losses and LAE from prior accident years, including the impact of adverse development of $7.7 million, net of estimated indemnification recoveries, related to Alliance United for periods prior to the date of its acquisition. Personal lines insurance loss and LAE reserves developed favorably by $13.3 million and commercial lines insurance loss and LAE reserves developed favorably by $6.8 million. Personal automobile insurance loss and LAE reserves developed favorably by $1.8 million, net of the adverse development related to Alliance United, homeowners insurance loss and LAE reserves developed favorably by $10.8 million, and other personal lines loss and LAE reserves developed favorably by $0.7 million. Excluding the adverse development related to Alliance United for periods prior to the date of its acquisition, personal lines insurance losses and LAE reserves developed favorably by $21.0 million due primarily to the emergence of more favorable loss patterns than expected for the 2013, 2012 and 2011 accident years. Commercial lines insurance loss and LAE reserves included adverse development of $1.8 million from continuing operations and favorable development of $8.6 million from discontinued operations.

In 2014, the Company reduced its property and casualty insurance reserves by $57.1 million to recognize favorable development of losses and LAE from prior accident years. Personal lines insurance loss and LAE reserves developed favorably by $50.9 million and commercial lines insurance loss and LAE reserves developed favorably by $6.2 million. Personal

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

automobile insurance loss and LAE reserves developed favorably by $31.6 million, homeowners insurance loss and LAE reserves developed favorably by $14.8 million and other personal lines loss and LAE reserves developed favorably by $4.5 million. The personal lines insurance losses and LAE reserves developed favorably due primarily to the emergence of more favorable loss patterns than expected for the three most recent prior accident years. Commercial lines insurance loss and LAE reserves included favorable development of $2.6 million from continuing operations and $3.6 million from discontinued operations. Commercial lines insurance losses and LAE reserves developed favorably from continuing operations due primarily to the emergence of more favorable loss patterns than expected for the 2013, 2011 and 2010 accident years.

In 2013, the Company reduced its property and casualty insurance reserves by $64.6 million to recognize favorable development of losses and LAE from prior accident years. Personal lines insurance loss and LAE reserves developed favorably by $56.8 million and commercial lines insurance loss and LAE reserves developed favorably by $7.8 million. Personal automobile insurance loss and LAE reserves developed favorably by $30.1 million, homeowners insurance loss and LAE reserves developed favorably by $20.1 million and other personal lines loss and LAE reserves developed favorably by $6.6 million. The personal lines insurance losses and LAE reserves developed favorably due primarily to the emergence of more favorable loss patterns than expected for the four most recent prior accident years. Commercial lines insurance loss and LAE reserves included favorable development of $3.0 million from continuing operations and $4.8 million from discontinued operations. Commercial lines insurance losses and LAE reserves developed favorably from continuing operations due primarily to the emergence of more favorable loss patterns than expected for the 2011, 2010 and 2009 accident years, partially offset by less favorable loss patterns than expected for the 2012 accident year.

The Company cannot predict whether loss and LAE reserves will develop favorably or unfavorably from the amounts reported in the Consolidated Financial Statements. The Company believes that any such development will not have a material effect on the Company’s consolidated financial position, but could have a material effect on the Company’s consolidated financial results for a given period.

Reinsurance and indemnification recoverables on property and casualty insurance reserves were $52.0 million and $54.9 million at December 31, 2015 and 2014, respectively. These recoverables are concentrated with several reinsurers, the vast majority of which are highly rated by one or more of the principal investor and/or insurance company rating agencies. While most of these recoverables were unsecured at December 31, 2015 and 2014, the agreements with the reinsurers generally provide for some form of collateralization upon the occurrence of certain events.